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Our latest perspective - What's behind under-performing listed companies?

Outperform through the downturn

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Decreased uncertainty, improved decisions

Global Advisors is a leader in defining quantified strategies, decreasing uncertainty, improving decisions and achieving measureable results.

We specialise in providing highly-analytical data-driven recommendations in the face of significant uncertainty.

We utilise advanced predictive analytics to build robust strategies and enable our clients to make calculated decisions.

We support implementation of adaptive capability and capacity.

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Global Advisors’ Thoughts: Outperforming through the downturn AND the cost of ignoring full potential

Global Advisors’ Thoughts: Outperforming through the downturn AND the cost of ignoring full potential

Press drew attention last year to a slew of JSE-listed companies whose share prices had collapsed over the past few years. Some were previous investor darlings. Analysis pointed to a toxic combination of decreasing earnings growth and increased leverage. While this might be a warning to investors of a company in trouble, what fundamentals drive this combination?

In our analysis, company expansion driven by the need to compensate for poor performance in their core business is a typical driver of exactly this outcome.

This article was written in January 2020 but publication was delayed due to the outbreak of Covid-19. Five months after South Africa’s first case, we update our analysis and show that core-based companies outperformed diverse peers by 29% over the period.

Management should always seek to reach full potential in their core business. Attempts to expand should be to a clearly logical set of adjacencies to which they can apply their capabilities using a repeatable business model.

In the article “Steinhoff, Tongaat, Omnia… Here’s the dead giveaway that you should have avoided these companies, says an asset manager,” (Business Insider SA, Jun 11, 2019) Helena Wasserman lists a number of Johannesburg Stock Exchange (JSE) listed shares that have plummeted in recent years.

In many cases these companies’ corresponding sectors have been declining. However, in most of the sectors there is at least one company that has outperformed the rest. What is it about these outperformers that distinguishes them from the rest?

The outperformers have typically shown strong financial performance – be that Growth, ROE, ROA, RONA or Asset Turnover – and varying degrees of leverage. However, performance against these metrics is by no means consistent – see our analysis.

What is consistent is that the outperformers all show clearly delineated core businesses and ongoing growth towards full potential in these businesses alongside growth into clear adjacencies that protect, enhance and leverage the core. In some cases, the core may have been or is currently being redefined, typically through gradual, step-wise extension along logical adjacencies. Redefinition is particularly important in light of the digital transformation seen in many industries. The outperformers are very seldom diversified across unrelated business segments – although isolated examples such as Bidvest clearly exist in other sectors.

Analysis of the over- and underperformers in the sectors highlighted in the article shows that those following a clear core-based strategy have typically outperformed peers through the initial months of the downturn caused by the Covid-19 outbreak.

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Strategy Tools

PODCAST: Effective Transfer Pricing

PODCAST: Effective Transfer Pricing

Our Spotify podcast discusses how to get transfer pricing right.

We discuss effective transfer pricing within organizations, highlighting the prevalent challenges and proposing solutions. The core issue is that poorly implemented internal pricing leads to suboptimal economic decisions, resource allocation problems, and interdepartmental conflict. The hosts advocate for market-based pricing over cost recovery, emphasizing the importance of clear price signals for efficient resource allocation and accurate decision-making. They stress the need for service level agreements, fair cost allocation, and a comprehensive process to manage the political and emotional aspects of internal pricing, ultimately aiming for improved organizational performance and profitability. The podcast includes case studies illustrating successful implementations and the authors’ expertise in this field.

Read more from the original article.

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Fast Facts

Fast Fact: Great returns aren’t enough

Fast Fact: Great returns aren’t enough

Key insights

It’s not enough to just have great returns – top-line growth is just as critical.

In fact, S&P 500 investors rewarded high-growth companies more than high-ROIC companies over the past decade.

While the distinction was less clear on the JSE, what is clear is that getting a balance of growth and returns is critical.

Strong and consistent ROIC or RONA performers provide investors with a steady flow of discounted cash flows – without growth effectively a fixed-income instrument.

Improvements in ROIC through margin improvements, efficiencies and working-capital optimisation provide point-in-time uplifts to share price.

Top-line growth presents a compounding mechanism – ROIC (and improvements) are compounded each year leading to on-going increases in share price.

However, without acceptable levels of ROIC, the benefits of compounding will be subdued and share price appreciation will be depressed – and when ROIC is below WACC value will be destroyed.

Maintaining high levels of growth is not as sustainable as maintaining high levels of ROIC – while both typically decline as industries mature, growth is usually more affected.

Getting the right balance between ROIC and growth is critical to optimising shareholder value.

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Selected News

Quote: Dr. Fei-Fei Li – Stanford Professor – world-renowned authority in artificial intelligence

Quote: Dr. Fei-Fei Li – Stanford Professor – world-renowned authority in artificial intelligence

“I think robotics has a long way to go… I think the ability, the dexterity of human-level manipulation is something we have to wait a lot longer to get. ” – Dr. Fei-Fei Li – Stanford Professor – world-renowned authority in artificial intelligence

While AI has made dramatic progress in perception and reasoning, the physical manipulation and dexterity seen in human hands is far from being matched by machines.

Context of the Quote: The State and Limitations of Robotics

Dr. Li’s comment was made against the backdrop of accelerating investment and hype in artificial intelligence and robotics. While AI systems now master complex games, interpret medical scans, and facilitate large-scale automation, the field of robotics—especially with respect to dexterous manipulation and embodied interaction in the real world—remains restricted by hardware limitations, incomplete world models, and a lack of general adaptability.

  • Human dexterity involves fine motor control, real-time feedback, and a deep understanding of spatial and causal relationships. As Dr. Li emphasises, current robots struggle with tasks that are mundane for humans: folding laundry, pouring liquids, assembling diverse objects, or improvising repairs in unpredictable environments.
  • Even state-of-the-art robot arms and hands, controlled by advanced machine learning, manage select tasks in highly structured settings. Scaling to unconstrained, everyday environments has proven exceedingly difficult.
  • The launch of benchmarks such as the BEHAVIOR Challenge by Stanford, led by Dr. Li’s group, is a direct response to these limitations. The challenge simulates 1,000 everyday tasks across varied household environments, aiming to catalyse progress by publicly measuring how far the field is from truly general-purpose, dexterous robots.

Dr. Fei-Fei Li: Biography and Impact

Dr. Fei-Fei Li is a world-renowned authority in artificial intelligence, best known for foundational contributions to computer vision and the promotion of “human-centred AI”. Her career spans:

  • Academic Leadership: Professor of Computer Science at Stanford University; founding co-director of the Stanford Institute for Human-Centered AI (HAI).
  • ImageNet: Li created the ImageNet dataset, which transformed machine perception by enabling deep neural networks to outperform previous benchmarks and catalysed the modern AI revolution. This advance shaped progress in visual recognition, autonomous systems, and accessibility technologies.
  • Human-Centred Focus: Dr. Li is recognised for steering the field towards responsible, inclusive, and ethical AI, ensuring research aligns with societal needs and multidisciplinary perspectives.
  • Spatial Intelligence and Embodied AI: A core strand of her current work is in spatial intelligence—teaching machines to understand, reason about, and interact with the physical world with flexibility and safety. Her venture World Labs is pioneering this next frontier, aiming to bridge the gap from words to worlds.
  • Recognition: She was awarded the Queen Elizabeth Prize for Engineering in 2025—alongside fellow AI visionaries—honouring transformative contributions to computing, perception, and human-centred innovation.
  • Advocacy: Her advocacy spans diversity, education, and AI governance. She actively pushes for multidisciplinary, transparent approaches to technology that are supportive of human flourishing.

Theoretical Foundations and Leading Figures in Robotic Dexterity

The quest for human-level dexterity in machines draws on several fields—robotics, neuroscience, machine learning—and builds on the insights of leading theorists:

Name
Contributions
Relevance to Dexterity Problem
Rodney Brooks
Developed subsumption architecture for mobile robots; founded iRobot and Rethink Robotics
Emphasised embodied intelligence: physical interaction is central; argued autonomous robots must learn in the real world and adapt to uncertainty.
Yoshua Bengio, Geoffrey Hinton, Yann LeCun
Deep learning pioneers; applied neural networks to perception
Led the transformation in visual perception and sensorimotor learning; current work extends to robotic learning but recognises that perception alone is insufficient for dexterity.
Pieter Abbeel
Expert in reinforcement learning and robotics (UC Berkeley)
Advanced algorithms for robotic manipulation, learning from demonstration, and real-world transfer; candid about the gulf between lab demonstrations and robust household robots.
Jean Ponce, Dieter Fox, Ken Goldberg
Leading researchers in computer vision and robot manipulation
Developed grasping algorithms and modelling for manipulation, but acknowledge that even “solved” tasks in simulation often fail in the unpredictable real world.
Dr. Fei-Fei Li
Computer vision, spatial intelligence, embodied AI
Argues spatial understanding and physical intelligence are critical, and that world models must integrate perception, action, and context to approach human-level dexterity.
Demis Hassabis
DeepMind CEO; led breakthroughs in deep reinforcement learning
AlphaZero and related systems have shown narrow superhuman performance, but the physical control and manipulation necessary for robotics remains unsolved.
Chris Atkeson
Humanoid and soft robotics pioneer
Developed advanced dexterous hands and whole-body motion, but highlights the vast gap between the best machines and human adaptability.

The Challenge: Why Robotics Remains “a Long Way to Go”

  • Embodiment: Unlike pure software, robots operate under real-world physical constraints. Variability in object geometry, materials, lighting, and external force must be mastered for consistent human-like manipulation.
  • Generalisation: A robot that succeeds at one task often fails catastrophically at another, even if superficially similar. Human hands, with sensory feedback and innate flexibility, effortlessly adapt.
  • World Modelling: Spatial intelligence—anticipating the consequences of actions, integrating visual, tactile, and proprioceptive data—is still largely unsolved. As Dr. Li notes, machines must “understand, navigate, and interact” with complex, dynamic environments.
  • Benchmarks and Community Efforts: The BEHAVIOR Challenge and open-source simulators aim to provide transparent, rigorous measurement and accelerate community progress, but there is consensus that true general dexterity is likely years—if not decades—away.

Conclusion: Where Theory Meets Practice

While AI and robotics have delivered astonishing advances in perception, narrowly focused automation, and simulation, the dexterity, adaptability, and common-sense reasoning required for robust, human-level robotic manipulation remain an unsolved grand challenge. Dr. Fei-Fei Li’s work and leadership define the state of the art—and set the aspirational vision for the next wave: embodied, spatially conscious AI, built with a profound respect for the complexity of human life and capability. Those who follow in her footsteps, across academia and industry, measure their progress not against hype or isolated demonstrations, but against the demanding reality of everyday human tasks.

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